What is a FHA Secondary Residence?

Secondary Residence

Any property that is occupied by a borrower beyond his or her principal residence is considered a secondary residence.

Homeowners seeking refinance are only allowed to have secondary residences under the following conditions:

• if an undue hardship exists: an HOC must conclude that the borrower has been unable to find affordable rental housing in the area or within a reasonable distance to commute to work; AND
• if the maximum amount of the loan is 85% of the lesser value between the sales price and the appraised value.

Additionally, the borrower’s case must fulfill each of the following criteria:

• the property cannot be primarily used for recreational purposes (e.g. vacation home)
• the borrower must have purchased it for reasons not involving recreational use, such as seasonal employment or job relocation
• it must be documented that there exists a lack of affordable rental housing in the vicinity to meet the borrower’s needs. The borrower will demonstrate this by providing written evidence from area real estate professionals, together with his or her own explanation for needing to acquire the property.

Any property that is occupied by a borrower beyond his or her principal residence is considered a secondary residence.

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